How To Buy Rental Property
The easiest and most common method is to directly purchase the property. It's a standard transaction, may sometimes involve a mortgage, but typically requires at least some form of a down payment since it will be used for commercial purposes. That's right – if you make money from a property, it becomes a commercial transaction.
#1. Use Your 401k to Purchase Properties
Did you know that a self-directed 401k or IRA can be used to purchase real estate? Rental properties that are incorporated into your investments aren't typically going to be managed by you, but it is a way to start investing now without affecting you liquid cash capitals. In return, you could end up creating quite the little nest egg for yourself when it is time to step out of your career.
#2. Raise Capital
If you're planning on purchasing a number of rental properties to turn them into a money making machine, then you might be able to raise some capital before the purchases to make this happen. You can get this from investors and even crowd-funding could be an option in certain situations. In return, you'll likely have to pay a percentage of your revenues to your investors. It can cut into your profits, but raising capital can help low cash reserve businesses and individuals get into a solid rental property without much hassle.
#3. Become a Property Manager
Maybe you want to get involved with rental properties, but you just don't have the cash to make that happen right now. If you have property management credentials, then you can take a paid commission off of the rental property in return for managing it for the investors who make the actual purchase. The downside of this method is that you don't actually have the tangible asset in your possession, but the good news is that you'll at least have a paycheck.
#4. Look for Foreclosures
Thanks to the Great Recession, there are always a number of foreclosures and empty homes that are available in every community. Many of these properties are considered abandoned and a bank simply wants to make back as much money as they can on it. This is a great way to get a good price and fair terms for a property and in return, you'll just need to do a few extra repairs.
There are also government foreclosures that are available in some communities as well. Properties that are run down will have up to a 50% allowance for repairs to be completed so that a property can be retrofitted, which means a $70k rental property might only cost you $35k overall.
Rental properties are a great investment. Use these options to get involved today.
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